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Hong Kong Tax Exemption Should Boost Hedge Funds

Thursday, June 6, 2013

In a media interview, Philip Tye, Chairman of the Hong Kong branch of the Alternative Investment Management Association, which represents the hedge fund industry, confirmed that the extended tax exemption proposed in his last Budget by Financial Secretary John Tsang should strengthen Hong Kong's position as an international asset management center.

In an article on the website of the South China Morning Post, Tye said that "the proposed reform plans would now make Hong Kong more attractive for fund companies to domicile their funds here. This will create job opportunities and benefit the hedge fund industry as a whole."

To attract more private equity funds in Hong Kong, Tsang's proposal is to extend the profits tax exemption for offshore funds to include transactions directly in private companies that are incorporated or registered outside Hong Kong (for example in Mainland China) and do not hold any Hong Kong properties nor carry out any business in Hong Kong. That would allow private equity funds to enjoy the same tax exemption as offshore funds.

In addition, while, at present, investment funds established in Hong Kong can only take the form of trusts, the Government is considering legislative amendments to introduce the open-ended investment company into Hong Kong. That should also encourage more traditional mutual funds and hedge funds to domicile in Hong Kong.